The Story on Australian Wine

Posted by | Posted in Interviews | Posted on 11-11-2013

Michael Twelftree from Two Hands Wines

The Australian wine industry has seen some tough times, to say the least. Following the surge of Yellow Tail and the soon after success of expensive, highly rated fruit bombs from Barossa, the industry is now grappling to find its footing.

Yellow Tail is attempting to stay relevant through new product launches. “You don’t want Shiraz? We’ll make Moscato! Sangria!”

Those pricier Parker darlings are now out of vogue with consumers, who (for now) seem to prefer Argentinian Malbecs.

And Australian wine companies, which for the last decade simply rode the wave of Shiraz’s success, are now doing things like taking $160 million write-downs and literally dumping excess inventory down the drain. And to layer on another blow, that same company is facing expensive legal action from its shareholders, who are angry that they didn’t know about the impairment earlier. What a mess.

As a wine writer, I have been reading what’s in the press about the state of Australian wine. Most articles fall into three camps: (1) Australian Wine is Doomed; (2) There is Hope for Australian Wine (e.g., cool climate wines are hot, not just in Australia, but all over); and (3) ____ is the New Australian Shiraz (insert grape/region in the blank. Hint: it’s usually Tempranillo).

However, the coverage has been overall pretty defensive in tone and, as a member of the media, I hadn’t heard much about Australian wines directly.

So when I learned that Michael Twelftree of Two Hands Wines was stopping through in New York, I was eager to meet with him and hear his take on the current plight of Australia.

His thoughts reiterate some of what Jancis Robinson said in her interview with David. Australia needs to focus on regionality and subregionality; Australia needs to think beyond Shiraz to other grapes like Grenache and Riesling; Australia needs to continue listening and getting out into the market; and finally, the success of Australian wine rests on the shoulders of smaller, quality wines brands. Interestingly, Michael wasn’t too keen on the work of Wines of Australia and thought that the producers themselves needed to step up and market themselves, working from the vineyards backward.

Our lunchtime conversation is below the fold.

IMG_7749Rebecca: If the success of the Australian market isn’t about mass brands and it isn’t about reliance on trade groups, what should Australian producers be doing?

Michael: You have to get out, to get in front of media, to do the travel. It takes a lot of man hours and it’s difficult.

When you look at Australian wines, we were so popular in America. The major publications were right behind the wines and they were getting massive scores — those are great talking points. But what happened was that the people making the wines never came to the United States.

I’ve been here 58 times in 12 years. And I’ve been to 37 states in America. So I’ve got over here, I’ve been working hard, I’ve got a great importer, a great distribution network. A lot of my neighbors, they’ve just loaded up the importer with lots of cases, made sure they got a score. They never made sure it was sold by the glass, made sure it was with the right distributors, made sure they were at the right spots.

Then all of a sudden three of the major importers of those wines went bankrupt. So now those wines are never going to be back in the United States. I’ve always said there were 10 relevant brands for the United States 5 years ago. I’d say there were 6 three years ago, and I reckon it’s almost down now to 3 or 4. That space is getting narrower and narrower, because they didn’t work hard enough when they had the opportunity.

So, you think there are only three relevant Australian brands in the United States right now?

I really do. You walk into a wine shop and ask the guy in the store, “Where are the Australian wines?” The guy always says, “Ah, behind the New Zealand wines.”

Does the currency exchange rate play a role?

When I started in the business, it was at $.63 and it went to $.50. Then it rose all the way up to $1.07 and now it sits at $.95. So, you’ve got this problem: while the market is trending toward Australian wines not being as popular, the currency has doubled against us. And it’s even harder to compete. My wine was sitting in the market at $20-22 dollars and it drove up at retail to $30-35. It’s a very different sale. It’s now back down to $27-30, which is okay, but when people come into the shop and have $20 in their pocket, they’re not going to buy your wine.

I have noticed that, even in the New York market where you think you can find anything, it’s gotten a lot harder to find Australian wines.

It really has. You used to trip over Australian wines in the stores — and now you trip over cases of Argentinian wines. You know, there are very few countries that can make the QPR wines. High volume, high quality, and consistent. And I think Australia did a good job of that.

But wine is fashionable. And I think things just changed. Grape varieties come in and out of fashion. Today in Argentina the prices are getting cheaper and cheaper. Chile is in a bit of a free fall. And I think Spain’s the next big thing. I really do. They’re making some great wines. They’re old world, but with new world packaging. They can do the volumes. You just wonder where that volume is going to come from next, because you just can’t do it in the United States. The prices of grapes here are just too high.

When you’re out in the market, what specific resistance do you get to your wines?

Well, it’s difficult because every state in America is like a different country. It’s very hard to generalize in this market. I went and spent four days in Texas a few months ago and they love Australian wines. I sold so much wine in those four days, I was like, “Yay!”

Then you come to an east coast market and it’s so traditionally engrained with the old wines of Europe, and it’s totally different. I really have to get specific about targeting certain markets, making sure distribution is right, and the message is right.

What is that message? What do you want people to know about Australian wines and about your brands specifically?

I’m a small producer in an industry controlled by such large companies. I’m the little guy fighting the good fight. I’m in the vineyards the day we pick the grapes; I’m at the winery the day the ferments go dry; I make a barrel selection on everything; and then I got to the market and sell the stuff. To me, I’m across every area of my business and supported by a wonderful staff. And my theory is you can have the greatest bottle of wine in the world, but if you can’t sell it, who gives a ****.

I also think the Shiraz message is getting disenfranchised in the United States. I think we’ve been beating the same drum for so long that it’s become so monotonous. There aren’t enough stories to tell anymore. You’ve heard them all. So I’m betting on a single vineyard Grenache that I started 4 years ago. And Riesling. Because I love it.

We’ve got to emphasize regionality and subregionality. The sad thing in Australia is a lot of our subregions are owned by corporations. So, I make grapes from a subregion, but I can’t use it on the label because that name is owned by a winery.

We’ve got to get away from one grape, one style, and one story.

Comments (4)

  1. Great interview! I appreciate the insight into the wine situation in other countries. I may be running out to the local wine shop and see if I can catch a close-out on some Penfolds Grange ;-)

  2. Thanks, Doug!

  3. Thanks for the interview! Australian Shiraz is my go-to-wine for sure. Will be interesting to see how all of this plays out.

  4. Great interview! As someone who learned to love wine in Australia, this is a topic near to my heart (and my palette!) I agree that these wines are more difficult to find on the East Coast and it’s a shame. The Aussie wines in stock are generally bigger brands but – having visited dozens of smaller wineries in Australia, the country could have a great future with these products. Now if only there were a cost effective way of transporting and marketing them here!